* To pay minority shareholders $14 in cash for each PetroLogistics unit

* To pay $12 per unit to majority shareholders (Adds background on U.S. petrochemical plants)

May 28 (Reuters) - A Koch Industries Inc unit will take PetroLogistics LP private in a deal worth $2.1 billion, including debt, gaining control of a plant that can convert cheap U.S. shale gas into propylene, a key petrochemical used to make plastics.

PetroLogistics’ propane dehydrogenation plant produces about 1.45 billion pounds of propylene per year. Propylene is also used to make paints, coatings, building materials, clothing, automotive parts and packaging, among other things.

The unit, Flint Hills Resources LLC, a refining, chemicals and biofuels company, will also buy all of the membership interests in PetroLogistics general partner PetroLogistics GP LLC.

“(PetroLogistics’) capabilities are well aligned with our existing chemical and refining business,” Flint Hills Chief Executive Brad Razook said in a statement.

A number of companies, including Dow Chemical Co, Enterprise Products Partners LP and BASF SE, are building plants in the United States to convert natural gas into propylene.

Natural gas is about three times cheaper in the United States than in Europe, thanks to the shale boom, giving U.S. petrochemical companies a significant advantage over their oil-dependent European rivals.

Propylene has traditionally been made from the oil distillate naphtha, but cheap shale is gaining importance as a feedstock.

Koch, with annual revenue of $115 billion, was the second-largest private company in the United States in 2013, according to Forbes. The company is led by brothers David and Charles Koch, two of the world’s richest men.

Flint Hills will pay $14 in cash for each PetroLogistics unit to minority shareholders who own 27 percent of the company. A group of shareholders who control the remaining 73 percent stake will get $12 per unit.

This group includes Lindsay Goldberg LLC, York Capital Management, PetroLogistics’ executive chairman, David Lumpkins, and its chief executive, Nathan Ticatch.

The minority shareholders will get $526.2 million, while the majority shareholders will get $1.22 billion, according to Reuters calculations.

PetroLogistics’ units closed at $12.93 on the New York Stock Exchange on Tuesday.